The Office of the Director of National Intelligence (ODNI) yesterday released national intelligence spending totals for fiscal year 2014. At $50.5 billion, spending is now way down from recent highs. But it is also way up from historic lows. What are we to make of the short-term fall and long-term rise? Is the IC still sitting pretty or should we worry about our intelligence capabilities?

I’ll try to answer that question below. But first, here is a quick overview of current intelligence spending by both the Intelligence Community and the Pentagon. This analysis updates work I conducted at the Congressional Research Service last year.

This graph shows total intelligence spending since the ODNI and Pentagon began releasing aggregate spending totals in 2007. After adjusting for inflation, spending has declined by 22 percent from its peak in 2010. This includes intelligence spending for war efforts (i.e. Overseas Contingency Operations or OCO), which has fallen significantly as the wars in Iraq and Afghanistan have wound down. It also includes non-war military intelligence spending, which has dropped by a whopping 40 percent.

When we remove military intelligence and intelligence-related war funding, national intelligence spending—meaning basically intelligence funding for big three-letter agencies in the Intelligence Community—has fallen by 11 percent since peaking in 2011. That is still a pretty huge drop. And the President requested even less funding for national intelligence next year.

It is worth comparing this recent drop to historic spending levels. Although actual intelligence spending figures are not available for most years before 2007, for sale we can estimate those figures going back to 1980 (for more on this, see page 5 here).

This graph shows the growth in intelligence spending—meaning national plus military intelligence—overtime. Even taking into account the recent decline, intelligence spending has still grown by more than 200 percent since 1980 and is $30 billion higher than before 9/11.

This is, of course, after adjusting for inflation! In nominal dollars, the growth is far more substantial (from roughly $8 billion in 1980 to $67.9 billion today). In comparison, the total defense budget, not including intelligence, is also significantly higher but has only grown by roughly 60% since 1980 (see page 6 here for a comparison between defense and intelligence spending increases).

Doing Way More with Much Less

Despite the substantial growth in intelligence spending overtime, recent cuts pose a huge challenge because the number of threats requiring intelligence resources is growing and because intelligence has never before been so central to America’s national security. In our increasingly interconnected, globalized world, a growing number of small actors can threaten the United States. The burden of anticipating, understanding, and responding those threats falls to the intelligence community.

Moreover, as the Pentagon’s budget declines and as we become more hesitant to engage in large-scale military operations, we rely more heavily on intelligence capabilities. Consider the Administration’s current approach to world crises, which involves tactical responses to strategic challenges that place a heavier burden on the Intelligence Community. Instead of signaling resolve in the Pacific by significantly bolstering our naval forces there, we have opted to do so by bolstering our ISR assets and intelligence gathering operations. Instead of taking an aggressive military stance as the conflict in Syria began to escalate, the Administration drew on its covert action authorities and turned to the CIA to arm moderate Syrian rebel groups. Instead of investing substantial manpower to address the threat posed by ISIL and Jabhat al-Nusra, the United States is conducting strikes that, to be successful, must rely on greater intelligence collection and analytic support.

Putting aside questions about the appropriateness of broader military responses in these situations, it seems clear that intelligence capabilities, not military might, now shape U.S. responses to national security problems. That means that, while the Pentagon is beings asked to do less with less, the Intelligence Community is being asked to do way more with much less.

I think that the IC can nonetheless absorb recent cuts quite easily. The lack of public transparency into intelligence spending, the general difficulty of evaluating the efficacy of intelligence programs, and the substantial post-9/11 rise in funding have created major inefficiencies. Further, post-9/11 intelligence reforms created new, expensive institutions and programs, only some of which have proven valuable.

Unauthorized disclosures over the last year have reinforced this judgment, as we’ve learned about programs that should have been mothballed years ago. This means that the numbers—the threats the IC must confront and the resources it has to confront them—can add up. There are plenty of opportunities to cut budgets without degrading capabilities.

Whether the IC will actually absorb cuts without degrading capabilities is a separate question. While it has the means to do so, thus far decisionmakers have not proven up to the task. Over the last year, we have seen Intelligence Community leaders defend ineffective programs. The ODNI has so far remained focus on its mission to break down stovepipes without dedicating comparable resources to eliminating inefficiency and de-duplication of effort. And legislators have defended the post-9/11 institutions they helped build instead of doing clear-eyed assessments of those institutions.

This suggests the IC is in for some very difficult times as it adjusts to post-post-9/11 budgetary realities.

[…] little more than a year ago, I published an analysis of the intelligence budget (Doing Way More With Much Less). It’s time I update that analysis based on the budget request the President sent to Congress […]